TOPICS > Economy

Infrastructure Spending May be Key to Boosting Economy

December 22, 2008 at 6:15 PM EDT
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Some economists believe increasing government spending on infrastructure is the only way out of the nation's economic crisis. Paul Solman reports on how infrastructure spending may be a crucial way to resuscitate the economy.

GWEN IFILL: Now part two of the jobs story. What will that money spent on new infrastructure projects buy? And will the government get enough bang for its buck? Our economics correspondent, Paul Solman, has been looking into those questions.

PAUL SOLMAN: The pockmarked roads of New Jersey, one small argument for why America desperately needs a massive infrastructure makeover.

ROBERT FRANK, economist: One-hundred-and-twenty-dollars-a-year damage per year per vehicle.

The potholes in the roads do more damage to vehicles each year than it would cost to fix them. That’s just ridiculous that we don’t fix them.

PAUL SOLMAN: But the main reason economist Bob Frank think we should splurge on infrastructure is that government spending is the road to economic recovery and the only way out of the hole we’re all in.

ROBERT FRANK: We’re looking at an unprecedented collapse in consumer spending. The firms aren’t spending.

There’s nobody who wants to buy the stuff they’re selling. So, what that means is that there is a huge demand shortfall that we’re looking at, maybe half-a-trillion dollars, maybe even more than that.

If the government doesn’t spend massively more in the next year, we’re in for a terrible, terrible downturn.


PAUL SOLMAN: Our incoming president would seem to agree.

BARACK OBAMA: But we need action, and action now. That’s why I have asked my economic team to develop an economic recovery plan for both Wall Street and Main Street that will help save or create at least 2.5 million jobs.

PAUL SOLMAN: By splurging on, among other things, infrastructure. It last happened in the 1930s, when, among the bridges, dams, tunnels and the like, this terminal at New York’s La Guardia Airport was built and adorned.

ROBERT FRANK: Spending projects had clearly positive effects on employment. Many people were employed who wouldn’t have been.

And the main lesson that’s come out of the ’30s is that, when FDR tried to balance the budget in ’36 and ’37, that created another recession, and that the true end to the Great Depression was when government demand really spiked upwards from spending during World War II.

That’s what we need now, is a massive infusion of government spending. To the extent it didn’t work in the ’30s, it was because there wasn’t enough of it.

Saving money, increasing security

PAUL SOLMAN: What could be more obvious, asks Bob Frank?

The economy needs spending. The infrastructure needs fixing, like New Jersey's Pulaski Skyway, a three-and-a-half-mile elevated road connecting Newark and Jersey City built in the 1930s.

BRIAN STRIZKI, state transportation engineer, New Jersey: This bridge is the same type of bridge that collapsed, the I-35 bridge in Minneapolis.

We're currently inspecting this bridge almost on a continuous basis. State transportation engineer Brian Strizki.

PAUL SOLMAN: Is it safe to drive?

BRIAN STRIZKI: Yes, it is safe to drive up there. But that's one of the areas that really isn't bad. We have other areas that are in much more urgent need of repair. There's been many, many years of neglect.

And, unfortunately, that has caused rusting of the steel, deterioration of the concrete, deterioration of the deck and other elements. To paint it is about $350 million.

PAUL SOLMAN: Forgive my asking, but how can painting a bridge cost $350 million?

BRIAN STRIZKI: It's all lead-based paint that is on the structure. So, we have to encapsulate the entire structure when we remove the paint.

PAUL SOLMAN: The point is, says Strizki, New Jersey could start painting right now, same for many other projects in this state alone, says Gov. Jon Corzine.

GOV. JON CORZINE, D-N.J.: One of the most important projects of national significance, right here in New York, New Jersey, which is build a new mass transit tunnel under the Hudson River, we have got the environmental studies done.

We have got the engineering plans. All we need is the money to -- and the trigger pull on go-ahead.

Making the most of public services

PAUL SOLMAN: And it's not just transportation projects that are -- quote -- "shovel-ready," says Kris Kolluri, New Jersey's former transportation boss, now head of school development.

KRIS KOLLURI, executive officer, New Jersey Schools Development Authority: In New Jersey alone, the aggregate cost of fixing schools is close to $25 billion.

This school, it's a 110-old structure, which has water infiltration problems. There's bathrooms only in the basement. The cafeteria and the gymnasium are -- are the same location.

PAUL SOLMAN: Closets as classrooms, the library carved out of the auditorium.

WOMAN: This here is our faculty bathroom.

KRIS KOLLURI: So, by every objective measure, this is not a -- an appropriate or safe or healthy environment for our kids to be learning.

PAUL SOLMAN: PS-20 is one of 155 Jersey schools more than 100 years old. This one is slated to be replaced, just as soon as they clean up the new site, laced with chromium toxic waste, another shovel-ready project.

A few miles away, however, on the pitted sidewalks of New York, economist Ed Yardeni.

ED YARDENI, economist: Do we know that there is a whole list of shovel-ready projects? We're going to take the word of a lot of state governments that are saying, if you want the money, you got to have something that's shovel-ready.

You don't think they are going to come up with a lot of projects that suddenly, out of nowhere, are ready to go?

We're going to build a lot of make-work projects that nobody really needs, a lot of roads and bridges to nowhere.

PAUL SOLMAN: Moreover, says Yardeni, with the wastefulness comes corruption. Plus, unions will fight to keep non-union members out. Nearby construction worker Mike Driscoll.

MIKE DRISCOLL, construction worker: You can't just walk in off the street and do something to get something done. You actually have to go through the unions.


MIKE DRISCOLL: And everything is done through the unions, in terms of -- politically, in terms of wages, in terms of skilled labor, being able to be qualified to be able to do the work.

PAUL SOLMAN: Besides, says Yardeni:

ED YARDENI: This is not the 1930s, where you had a lot of able-bodied men who were unemployed, and you could send to the Hoover Dam, and -- and build the thing.

Here, we have got a lot of people in the services academy that, they're not shovel-ready.

GOV. JON CORZINE: I don't buy that argument. It's true that somebody coming out of Wall Street probably isn't going to transfer to the long end of a shovel.

On the other hand, it strikes me that there are -- with two-thirds reduction in the amount of homebuilding going on in the country, there are a lot of people available for these jobs.

Increasing job efficiency

PAUL SOLMAN: A lot of people for a lot of jobs and a lot more efficiency.

GOV. JON CORZINE: Each billion dollars that we spend probably creates a conservative number of 20,000. And second thing it does, it creates a much more efficient economy and quality of life for our public.

PAUL SOLMAN: In the end, says Corzine, infrastructure spending just makes sense, as it did in the '30s with FDR's Works Progress Administration, the WPA.

GOV. JON CORZINE: George Washington Bridge, the Lincoln Tunnel, the Golden Gate Bridge, the Hoover Dam, the TVA. Things that are still paying dividends for society were built in that era. And they created jobs.

They changed the psychology. They didn't end all of the Depression, but we went from 25 percent unemployment down to 12 percent. And we were prepared and better served because of those investments made. We ought to be doing that now.

PAUL SOLMAN: Isn't this socialism? I mean, it reminds me of this mural, you know, where the noble worker will get everything done under the management of government.

ROBERT FRANK: These are unusual circumstances. So, getting extra spending into the system really is the imperative right now. It's got to come from government, at rare moments like this.

PAUL SOLMAN: Isn't there a problem in the long run if government borrows the money, say, or prints the money to do all of this?

ROBERT FRANK: If the alternative is to have people sitting idle, then we're better off in the long run, even if we borrow every nickel to hire the people to do the work.

PAUL SOLMAN: But to Bob Frank, and most economists these days, we can worry about the long run tomorrow. Right now, we have got to get out of the rut, even if a national infrastructure program might be a sometimes bumpy ride.